Regulating a utilityA Water Services Association case study

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Page 1: Introduction

We all rely upon having access to water throughout each day every day of our lives. Think how many times over a 24 hour period we use a tap, flush a toilet, fill a kettle, brush our teeth, cook, drink or wash. Industry also requires water to bring us all of the other goods and services we require for our daily needs. In these and many other ways water is an integral and essential part of our everyday lives; important for our health and well-being, something upon which we depend and the quality of which we need to be able to trust.

Water has not always been as available or as safe to drink as it is today. During the nineteenth century there were many public health concerns resulting in the passing of a number of Acts of Parliament, notably the Public Health Act of 1848. Since then it has been accepted that it is important to monitor the sufficiency and wholesomeness of water supplies, not just for the protection of the public, but also to ensure that the wider interests of the community and the environment are met.

1989

Until 1989, water supply and sewerage services in England and Wales were largely provided by 10 regional authorities, based upon river basin catchment areas. In addition to water supply and sewerage services, their wider responsibilities included resource planning, pollution control, fisheries, land drainage, flood protection and care for the environment. These authorities also had the responsibility to monitor their own activities, which from time-to-time led to conflicting responsibilities.

1989 was the year which signalled change for the water industry. TheWater Act of 1989 set out the framework for a process of privatisation with the government issuing licences to companies for the provision of water and sewerage services throughout England and Wales. Ten companies were formed to provide both water supply and sewerage services and these have become known as water service companies (WSC). Twenty-one others provide only water supply services to about 25% of the population, are known as water supply companies and have always been in the private sector.

Though privatisation brought many new-found freedoms for the water service companies, e.g. the freedom to borrow money to fund long overdue improvements, it also brought many responsibilities. By creating localised monopolies, where the only source of supply was a particular privately-owned water company, there were understandable fears for the whole process. For example, customers were concerned about how the changes would affect standards of service and the prices which were charged, as well as how these newly formed companies would try to meet their wider responsibilities.

The answer was regulation. Regulation involves the development of rules or conditions which govern the behaviour of an organisation, by setting standards which are clearly defined, understood and designed to be achieved.